you are right - £22k pa can not be justified. Not only in any business plan but more by the fact that potential tenants in this market are not taking up this offer at this level.
This is something that has puzzled me for some time. Below is something I wrote on the Sydeham Town Forum earlier this year, which will explain some of it in some locations, but I doubt if it is the whole story.
I've just been doing some research on commercial retail yields, focusing on the premium which investors will pay for retail freeholders where they think there is a chance of being able to convert the property to something more profitable - e.g. housing. This is hardly a thoroughly researched bit of work, but it looks as if the yield on retail freeholds where there is no chance of retail conversion is about 7.5%. In contrast, the price of £150,000 being asked for the freehold of 291 Sydenham Road implies a much lower yield. There isn't a directly comparable rental being asked, but the amount asked for the much more attractive location of 250 Kirkdale, £9,500, implies a yield far lower than 7.5% - in other words, there is a substantial premium in the £150,000 price asked for 291 Sydenham Road to reflect the likelihood that it will in due course become residential.
Such considerations mean that the Town Team, in their efforts to revitalise our High Street, will have to identify commercial landlords who believe that they have more to gain from the new team's efforts than from conversion to residential. This must start from doing more detailed analyses along the lines of the previous paragraph, and identifying the likely winners. In geographical terms, it is likely to amount to identifying core areas, e.g around Sydenham Station, Forest Hill and Kirkdale Village, and starting the necessary dialogue with the commercial landlords and their agents.
It will not be easy; these will be hard headed business men and women, who know very well that local authorities have housing targets to meet - that's why they are paying those premiums for freeholds. To make any progress, LBL will have to support the new Town Team by re-emphasising its planning policies to favour retail uses. LBL may also need to concede on planning policies seen by businesses as undermining retail profitability, e.g. the conservation area rules
.[/quote]
Search
Help
